The success of a rental property investment hinges on several factors. Fortunately, many of these factors are within the control of the individual investor. To make the most money through your rental property investment, be sure to pay attention in these key areas.
Conduct Investment Property Analysis
You must pick the most profitable rental properties when purchasing. However, how would you know which properties are the most profitable ones? The answer is via thorough investment property analysis. The importance of this cannot be stressed enough. Real estate metrics, such as cash on-cash-return and capitalization rate, determine the profit margins and are used to approximate the return on investment (ROI) that you can expect for a rental property. Hence, you must learn to calculate these real estate metrics to ensure you are investing in positive cash flow properties. (These are investment properties where the annual rent is more than the total annual expenditures after tax deductions are taken into consideration.)
An online ROI calculator tool is commonly used to perform these calculations and has created a significant impact on the landscape of real estate investing. Making these calculations is one of the best ways to earn more money from your rental property.
Pick The Right Tenants For Your Rental
Your tenants largely determine the success of your investment in your rental property. The best course of action is to run thorough background checks on all your tenants before signing the contract. The purpose of these background checks is to ensure that your tenants can pay the monthly/annual rent on time so there would not be a need for disputes later on over late rental payments. To make sure your property is in safe hands, take care to select a tenant with a decent renting history.
Put Money In Positively Geared Properties
To put it in layman’s terms, a positively geared property is a sound investment that makes more money in rental income than it costs in the repayment of loans and other expenditures that are associated with the ownership of the said property. These properties are also referred to as positive cash flow properties, precisely because they create positive cash flow. Cash flow properties are the way to go if your primary objective in real estate investing is to make more money. Depending on the rent you set for your property, you have the opportunity to make a sizeable profit after subtracting the rental expenditures from your rental income.
Take Leverage Of Tax Benefits
The best part of investing in rental properties is that you get numerous tax benefits. You can use this to your advantage to boost your rental income. To that end, be sure to check out what tax deductions apply to your rental property. It stands to reason that if the taxes you have to pay to go down, the rental income that you will generate will increase. You are also eligible to receive further tax benefits if your rental property incurs any losses. In the short term, availing tax benefits might not seem like a smart strategy to make more money. However, you will find that by taking benefit of these tax deductions, you can save a sizeable amount of money over time.
Do Not Include Utilities In The Rent
Any real estate investor worth his or her salt will tell you that the rent you set for your tenants should exclude utilities like electricity, water, gas and sewage. The tenants who occupy your property should be responsible for the utility bills. Not including utilities in the rent is a common and legal practice worldwide. The purpose of this is to maximize your income and make as much money as possible through your rental property investment.
Get The Best Insurance Policy
When investing in a rental property, make sure you get the best insurance policy. This is an excellent way to increase your income through rental property investment. It is only wise that you have a backup or a safety net in place lest your rental property experience any damages.
You can talk to the local real estate agents to seek their advice on the best insurance policy to purchase. Alternately, you can also ask other rental property investors about what kind of insurance policy they have. You can make the most sensible choice regarding your insurance policy by consulting with others. Regardless of which insurance policy you buy, make sure to peruse all the terms and conditions carefully before you sign on the dotted line.
In a nutshell, it comes as no surprise that all rental property investors seek to boost their rental income as much as they can. If you are one of these people, you must equip yourself with the knowledge of how to make the most money through rental property investment.